US data weak; China equities tumble even as data strong; RBA getting sidelined; UST 10yr at 2.83%; UST 2-10 curve slides; oil up again, gold down again; NZ$1 = 67.9 USc; TWI-5 = 71.5

Here's our summary of key events overnight that affect New Zealand, with news authorities seem to be losing control of some key policy positions.

Firstly however, all eyes will be on the RBNZ at 9 am and the signals we can glean from today's OCR review statement given the quite fast weakening of the New Zealand economy.

In other news, US durable goods orders other than for aircraft have came in weaker than expected. A +0.5% rise was expected for May after April's +1.9% gain. But in the end a -0.3% drop was posted disappointing markets. Compounding the issue, inventories are building faster than expected.

More positively, the American goods trade balance was slightly smaller in May than April but perhaps that is reflecting a gloomier outlook.

Also disappointing markets, pending home sales in the US also came in low, down -2.8% from the same month a year ago. That is five straight months that this metric has declined.

In China, even though official data shows earnings rising quickly at major enterprises, their stock market posted sharp losses yesterday with the Shanghai index down more than -1%. In Hong Kong, where many more Chinese companies are listed, they were down -1.8%. These are large selloffs and come as markets struggle to be positive in the face of the tariff tiff with the US.

However, official data may be understating the strength of the Chinese economy, according to China Beige Book. The picture of China's economy slowing in the second quarter is misleading, or even inaccurate, with retail sales and investment actually stronger than the official data show, they say. Current weakness in official data in May reflects not the current situation but weakness seen earlier this year and late last year. Similarly for investment, official statistics are lacking as they undercount retail spending, according to the private survey which collects anecdotal accounts similar to those in the US Federal Reserve Beige Book.

In Australia, there is also increasing talk that their central bank is getting sidelined in its influence on future interest rate direction. The RBA is determined to hold rates stable, but market forces are pushing rates - including mortgage rates - up.

The UST 10yr yield is down -5 bps today and now under 2.83%. The Chinese 10yr is at 3.59%, down -1 bp, while the New Zealand equivalent is now at 2.92%, also down -1 bp. The UST 2-10 yield curve is now just +32 bps and hasn't been this low since August 2007 when it was rising very fast, or June 20005 when it was sliding quickly. This recession-predicting signal is why markets are very skittish. And perhaps we should also start to keep an eye on the US overnight Federal Funds rate which seems to be rising a bit faster than the Fed policy makers would like.

Gold is down another -US$4 in New York to just US$1,254/oz. That is a new 2018 low.

Oil prices are still racing higher in the US, up by more than +US$2/bbl again today with the US price is now just on US$72.85/bbl. The Brent benchmark is up strongly as well at US$77.70/bbl. Our pump prices won't be able to avoid the consequences, especially as our currency is falling sharply too. In the past week, crude oil prices have risen almost +10% in NZ dollars. Since the end of March they are up +28%.

The Kiwi dollar will start today just 67.9 USc and down yet another -½c from this time yesterday. On the cross rates we are also lower at 92.4 AUc, and 58.7 euro cents. That pushes the TWI-5 down to 71.5 and its lowest level since November 2017. We should also note that the Chinese yuan is devaluing sharply against the US dollar. But not against currencies like the NZD. Essentially, the position of the greenback is a consequence of US policy, not Chinese policy, despite what the Americans claim.

Bitcoin is little changed since this time yesterday at US$6,116.

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